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Tax exemption for production of renewable electricity to be revised

The government has proposed a revised tax exemption for production of renewable electricity. The proposal was introduced in March 2015 and has now been included in the Finance Bill for 2016, which was presented on September 21 2015. The new regulations are expected to enter into force on July 1 2016.

The proposal is a consequence of EU state aid issues and the revision of the Swedish-Norwegian agreement on a common market for electricity certificates. The tax exemption has been criticised by Norway, as well as by a number of Swedish players in the industry (eg, Swedenergy and the Swedish District Heating Association). The exemption was initially aimed at simplifying administration of small-scale, non-commercial production. However, large-scale producers have also benefited, giving them the advantage of both electricity certificates and the tax exemption. In addition, the rules have been criticised for not being technology neutral because they benefit wind power only.

The government intends to harmonise the rules for other types of electricity production, while limiting the tax exemption for larger-scale producers. Electricity will be exempt from energy tax if it is:

produced by a plant with a generator capacity of less than 50 kilowatts (kW);

produced by a producer with an installed capacity of less than 50kW; and

not transmitted to a network to which concessions apply.

Fifty kilowatts equals an installed generator capacity of 125kW for wind and wave power, and 255 kW for solar power. The criterion that the electricity may not be transmitted to a network requiring concessions was introduced to ensure that only electricity consumed by the producer is exempt from tax. This restricts producers from transmitting electricity from a production plant to a plant where it is consumed.

The new rules are set to apply from July 1 2016 for all electricity produced, regardless of when the plant was commissioned.

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